After such a powerful rally the prior week and to finish to the month we expected to see some retracement. However, that was limited this past week to Monday and Tuesday, as the bulls had enough "watching," and dip buyers came back to the game in a big way Wednesday. All in all, the indexes had little net movement, but were up nonetheless.
The passage of time at these higher levels improves the odds and staying power of the big moves the markets have had recently. Indicators continue to turn from bearish to bullish. Yet, the weekly price channel in the top pane (below) has not fully confirmed this rally as anything more than of the bear market variety.
The channel is still intact and the candles on this chart are pink, which means moderately bearish. The SAR (arrow) remains bullish, and the downtrend line may be removed soon and replaced with a flatter resistance line.
The indicators we are using this week include the traders dynamic index (TDI) and the Chande momentum indicator. The TDI uses a combination of indicators such as the Relative Strength Index (RSI) and Bollinger bands that give excellent buy/sell signals on crossovers. Note the recent one in late July, and now we see the lines are crossing above the "smoothed" line for the first time in a year.
Looking back to 2020, this crossover in July of that year was an excellent spot to get long. The Chande oscillator also looks at relative strength as getting weak or strong in markets. It is similar to other momentum indicators in that the strongest signals are created from higher highs, higher lows on the chart. We see the S&P 500 weekly Chande indicator is currently at the zero line, a level of resistance that says this rally could stall out.
So we have divergence in similar indicators. In this case, defer to the price chart, which is still bearish but starting to look better.